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Demographics of Debt


The famed patriot Patrick Henry proclaimed “Give me liberty … or give me death!” at America’s founding.

These days, the country’s motto has changed to “Forget financial liberty … give me debt!”

American household debt hit a record $13.21 trillion in 2018. If you had to write that check it would read $13,210,000,000,000.

Lucky for you, that debt is shared by about 300 million people. But who are the most likely to get into debt?

More importantly, who are the ones most likely to get out of debt?

It’s all a matter of age, income, ethnicity, family type and education level. Demographics don’t strictly determine one’s debt, but understanding such statistics can clue you in to your financial future.

It can also motivate you to go against the numbers and find financial liberty. Here’s a look at the major demographics of debt.

Average American Debt by Age

You’ve probably heard the saying “You have to spend money to make money.” Economists debate that, but there’s little doubt that people spend more when they’re making more.

That’s borne out by the Survey of Consumer Finances, which the Federal Reserve conducts every three years. The most recent survey was in 2016 and showed the peak earning years are also the peak debt years.

Here’s the average amount of debt for each age group:

Under 35: $67,400
35–44: $133,100
45–54: $134,600
55–64: $108,300
65–74: $66,000
75 and up: $34,500

The type of debt reflects where people are in their personal and career development. Here’s a brief look at each age group:

Ages 35 and Under

The greatest sources of millennial debt are credit cards (20%) and student loans (21%), according to a 2018 Northwestern Mutual survey. About 40% of monthly income is spent on discretionary costs – clothes, entertainment and other non-essential items.

Age 36 to 44

Almost 87% of families are in debt with the average in December 2018 being $135,768. The majority of it is mortgage debt since this is the time when most people settle into a permanent home and start a family. The median housing debt is $93,700, and almost 50% carry credit card debt of $2,500.

Age 45 to 54

The middle-age trends remain steady, though fewer hold student loan debt. Most entered the workforce before the Great Recession did not have to depend on financing as much as younger age groups.

Age 55 to 64

About 77% of families in this age bracket are still in debt but the median household debt has dropped to $69,000. Mortgages and student loans get paid off and people focus more on saving for retirement.

Age 65 to 74

Retirement arrives, though the median household debt is$42,000. People spend and borrow less, though 42% of households still carry at least $2,500 in credit card debt.

Age 75 and older

The vast majority live on fixed incomes, though a 2017 Bureau of Labor Statistics report found that workforce participation has increased from 6.4% in 2006 to 8.4% in 2016 and is expected to hit 10.8% by 2026.

Some of that rise is attributed to better overall health and longevity, but the rising medical costs and lack of savings force some people to continue working.

Debt and Education

The more educated you are, the more debt you have. That’s because higher education leads to higher income, and higher income leads to higher spending.

A Federal Reserve report showed that that people with college degrees carry an average of $8,200 in credit card debt. Those who attended college but did not graduate carry $4,700.

High school graduates only carry an average of $4,600, while those with no high school diploma carry $3,800.

But the percentage of debt vs. income decreases the higher you go. For those in the lowest 20% of the income scale, their debt is 15% of their annual income. For the highest 20% of wage earners, it’s only 2.4%.

A person’s education level directly affects their earning potential. Here are 2017 Bureau of Labor Statistics on average annual income:
  • Less than a high school diploma – $25,636
  • High school education – $35,256
  • Attended some college – $38,376
  • Two-year college degree – $41,496
  • College degree – $61,828
  • Advanced degree – $75,452

Though it’s not always the case, if you’re smart enough to get a college education you’re probably smart enough to stay out of unmanageable debt.

Average Debt to Income Ratios

Debt to income ratio is a key indicator of financial health. It’s determined by taking you monthly expenditures and dividing that number by your monthly income.

For instance, if your bills amount to $5,000 a month and you make $7,500 a month, your DTI is 66%. It also means you are dire need of financial overhaul.

The maximum DTI you can have to qualify for a mortgage is usually 43%. Most financial advisors recommend keeping your DTI at 30% or lower.

Overall, DTIs have risen over the years. A 2018 Federal Reserve report showed a slow but steady rise from 1980s, then a sharp increase during the housing boom of the early 2000s.

It dropped with financial crisis of 2008, which indicated many households cut consumption or defaulted on loans.

The median household income hit $61,372 in 2017, according to the U.S. Census Bureau. That’s almost $20,000 more than it was in 2000.

But the typical American household now carries an average debt of $137,063. The median debt was only $50,971 in 2000.

Year-to-year DTI statistics are hard to come by, but given the rise of debt versus the rise in income, it’s apparent that Americans in all demographic groups have higher debt-to-income ratios.

Debt and Family Type

Research shows that singles have more friends and certainly more free time than married couples, but being married decreases the chances you’ll stay in debt.

A 2017 study of 2,000 people by TD Ameritrade found that 43% of married couples considered themselves financially secure compared to 29% of singles.

Married people make an average of $61,700 annually compared to $52,900 for singles.

About 30% of singles aren’t saving money, compared to 17% of married couples.

Debt and Income

The wealthier you are, the more likely you will carry debt. Of course, the wealthier you are, the easier it is to erase that debt.

When it comes to home ownership, smaller income means less chance of even qualifying for loan debt. Credit card qualification is less stringent, but the basic rule still applies.

People in the highest 10% of annual income had an average credit card debt of $11,200, according to a 2018 ValuePenguin analysis of Census and Federal Reserve reports.

The average debt based on income scale:
  • $160,000 and more – $11,200
  • $115,000 to $159,999 – $8,300
  • $70,000 to $114,999 – $5,800
  • $45,000 to $69,999 – $4,900
  • $25,000 to $44,999 – $3,900
  • Less than $24,999 – $3,000

Debt and Minorities

Minorities in general earn less than whites, though that doesn’t necessarily translate to more debt. A 2018 study of census data by ValuePenguin found that individuals who identified as white carried an average of $7,942 in credit card debt.

That was followed by Asians ($7,660) and blacks ($6,172). Less credit card debt doesn’t necessarily mean less financial strain, since blacks have less overall income to pay bills.

The median household income of blacks was $49,258, according to a 2017 report by the U.S. Census Bureau. Hispanics averaged $59,486, whites averaged $68,145 and Asians averaged $81,131.

A 2016 report from the Federal Reserve showed the median net worth of white families was almost 10 times that of blacks, and that about 20% of black families have zero net worth.

The median net worth for white families was $171,000, compared to $17,600 for blacks and $20,700 for Hispanics.

Student loan debt disproportionally affects minorities. About 87% of blacks take out student loans at four-year colleges, while 65% of Hispanics take out student loans, according to the National Center for Education Studies.

Blacks average $7,400 more in debt than white when they graduate, and that gap widens over time due to higher default rates.

Debt and Gender

Women have made huge economic gains over the decades, but most will have more debt than men. A primary fact is women make 82% of what men earn, according to a 2017 Pew Research Center analysis of median hourly earnings.

Experts cite a variety of reasons for the gender gap – discrimination, career choices, maternity and others. Whatever the cause, the end result is that women have less money.

Many also don’t invest it as effectively as men. A survey in investments by BlackRock found that women prefer to keep 71% of their funds in cash, while men keep 60%. Cash has zero risk but also zero potential to grow as stocks.

One problem is many start their career in deeper financial holes. Women hold about $900 billion of the $1.5 trillion in student loan debt, according to 2018 report by the American Association of University Women.

There are more women in college (56%) than men and they take out larger loans. They also generally choose less-lucrative fields of study, according to the Harvard Business Review.

That affects long-term savings and retirement, which is where a gender medical gap can be costly. The average 55-year-old woman will pay an average of $79,000 more in for health insurance over her retirement than the average 55-year-old man, according to a report by HealthView Services.

Women pay more because they live on average two years longer than men, the report found, not because they need more health care.

Student Loan Debt

Paying for college has turned into a long-term burden for millions of Americans. The total bill as of November 2018 was $1.56 trillion, which was more than double what it was a decade earlier.

About 66% of students who earned four-year degrees in 2017 took out loans and owed $28,500 when they got their caps and gowns.

Of the 42.2 million people with federal student loans, 2.7 million owed at least $100,000.

The Fed’s Survey of Consumer Finances shows that 22.4% of families had student loan debt in 2016. Only 8.9% were paying such loans in1989.

The average family owed $5,400 in 1989. That ballooned to $34,200 in 2016.

Even adjusted for inflation, that’s a three-fold increase. The average monthly payment was $339 a month.

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].


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